How to Make Redundancies Without Paying Compensation

In last week’s blog, I set out what redundancy really means. This week, I’ll show you the three stages you must go through for the redundancy to be fair.

If you don’t follow a fair procedure, the dismissal will be unfair and you may be ordered to pay compensation.

Stage One – Consultation

You must consult with your employees.

This gives them the opportunity to suggest how job losses can be avoided. Even if the suggestions are unworkable, you will at least be able to show that you’ve consulted with them..

If you’re a small company and you’re not making more than 20 redundancies, a two week consultation period is probably long enough. You should consult all employees who are at risk of redundancy.

We recommend that you begin the consultation process by sending a letter explaining that you need to make redundancies and why. You may want to invite voluntary redundancies.

You should follow up the letter with a meeting. It is your choice whether you have individual meetings with each employee or whether you hold a meeting with everyone together.

Following the meeting, you should be in a better position to decide which employees will be made redundant.

Stage Two – Selection

How do you decide who to select for redundancy?

There’s no golden rule. However, you must use objective criteria, such as length of service or frequency of absence. Avoid using criteria that are difficult to measure, such as friendliness to customers.

The following are examples of good objective selective criteria:-

Years of service

Attendance record;

Technical expertise;

Disciplinary record;

Productivity.

A decision to dismiss based on these reasons is more likely to be fair.

Stage Three – Alternative Employment

The final stage is to consider alternative employment for those who have been provisionally selected for redundancy. Even if you’re a small business, you must consider whether you could deploy an employee elsewhere.

Employment is deemed suitable if it is similar in terms of pay, duties, hours, responsibility, and status. The new job does not have to be equal to the old job. It may be slightly lower pay or less responsibility.

Don’t fall into the trap of thinking that employment is unsuitable just because it entails a demotion or a reduction in wages. If there is any position remotely suitable, you should offer it to the employee. They may reject it but that should be their decision and not yours.

The basic test is whether the overall package would be suitable for someone with the employee’s skills, abilities, and working history.

Don’t forget . . .

If you get it right, you won’t have to pay compensation. But you’ll still need to pay the employees their redundancy payment. To find out how much this should be, use this redundancy calculator.

Can we help you?

If you need help and advice on a possible redundancy situation, feel free to call us or complete the form below and we will call you.